Pages

Thursday, April 18, 2013

Zig Zag?

The market put in another lower low today and this confirms 1597 as a significant top of some yet to be determined degree. I originally had 1589 as the "ideal" top for the 5 waves from 1343 but when the market made a significant peak at 1563, I figured that level would be best suited for the end of W3 of W3, since 104*1.618= would have been 1566. So I assumed another wave in equal size to W1 at 104 would start from the 1538-39 level, which was greatly supported by that massive bullish wave that started after an abrupt bullish reversal at 1539. But now that the market managed to retrace all its gains and breach support, the question is 1597 the end of a 5 wave count from 1343 or is 1597 the real end of W3 of W3. It would have been much easier if the market followed the count as it would have made it more predictable. But I am sure we all enjoy a challenge, so we'll just have to figure this out as we go along. The Short Term Trend is officially bearish and this bearish wave from 1597 looks better now like a ABC than a 5 wave count as it did yesterday as the "C" leg is almost the same length as the "A" leg. I could still label it a 5 wave count but the 5th wave is by far the longest and the W4 correction highly pronounced and disproportionate to W2. So I will label the end of this apparent Zig Zag a W, which assumes a double Zig Zag and a correction into May before the resumption of another Int bullish wave.

If the market found a bottom today, this could serve well as the neckline for an Head and Shoulders targeting approximately 1480, which could be the level where the 200 DMA rises to taking into consideration this correction will take a few weeks. So my plan is still buying back VXX around the 1570 level assuming further downside. However, should the market stage a mad rally from here to recapture the trend, then that will imply 1597 will be challenged.